TITLE:
Earnings Management Motivation and Cost Stickiness—Research Based on Private Equity Placement
AUTHORS:
Yihuan Li
KEYWORDS:
Private Equity Placement, Earnings Management Motivation, Cost Stickiness, State-Owned Enterprises, Big Four International Audit Firms
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.8 No.3,
March
21,
2018
ABSTRACT: Cost Stickiness means that costs increase more
rapidly with an activity increase than they decrease with an activity decrease.
This paper focuses on
Chinese A-shares listed companies, which implement private equity placement
from 2007 to 2016, to study the impact of earnings management motivation of
private equity placement on listed companies’ cost stickiness. The results show
that the listed companies implementing private equity placement have positive
motivation of earnings management, and will cut more costs when the operating
income declines, thus weakening their cost stickiness. Further tests find that
this weakened effect is more obvious in the state-owned enterprises, and less
obvious in the enterprises audited by the big-four.